In today’s modern world, personal debt is becoming an almost-universal problem in most developed nations. For decades, the growth of high-interest ‘pay day’ loans and credit cards has made it far easier for individuals to finance the things that they want or need. This has led to a situation where many people now find themselves with an amount of debt that can seem almost impossible to pay off.

For those who want to become debt-free, this goal must become their top priority. They must be willing to save and sacrifice to get debt paid down, without finding at the end that they’ve simply rearranged their debts and are no better off. If you, like so many others, want to get your personal debts paid off quickly, consider the following steps.

Take the time to list absolutely everything about your personal finances.

In short, this step involves building a personal balance sheet and income and expense report that you can use for budgeting. To begin, you need to separately list all of your debts, all of your sources of income and your assets (these include cash, investments that could be sold, and home equity if you own your home). Most importantly, you need to list and begin tracking every one of your expenses. Break these down into categories like rent, utilities, insurance, or entertainment.

Now that you have everything listed, look for areas that could be cut.

The easiest place to start is with expenses. Look for spending that could easily be reduced or eliminated. Nights out with friends, movies and other entertainment are prime examples. If you have the goal of lowering your debt, you need to be willing to forego nights out and other discretionary spending. Instead, start putting aside the money you would’ve spent so that it can be used to pay down debts. Also, look at any investments that you have. Are there any that might be sold in order to pay down debt? Are there less expense housing options that you might consider while you eliminate debts (a cheaper apartment, taking a roommate, etc.)? If you have any large purchases that you’ve been contemplating, put those on hold. Instead, use the money you would’ve spent to pay down debt.

Start attacking debt balances in the right order.

Once you’ve identified cuts in spending, sold investments to raise cash, or just started saving more of your income, start paying down any debt balances you have. This should be done by paying more than the minimum payment each month – any extra money that you can pay goes straight towards your outstanding balance. Start first with higher-interest debt, especially credit cards. If you have any unsecured loans, these likely carry a higher interest rate than student loans or a home mortgage and should come next. The reason for addressing these high-interest items first is that they cost more to carry each month. Once you pay off high-interest debts, it will become a lot easier as you begin paying off the lower-interest loans that remain.

Pay any windfalls directly toward your debt balances.

Any cash gifts that you receive, bonuses from work, or even court settlements can be tempting to spend. When we get cash that we didn’t expect or haven’t accounted for in building our monthly budget, it’s easy to want to treat ourselves. Instead, should you receive cash that isn’t part of your normal monthly budgeting, immediately set that money aside to be paid toward one of your debt balances – whichever is the highest interest. Depending on the amount, you may be able to pay down a sizeable part of the loan all at once or even pay it off. That will bring you much closer to your goal very quickly.

If you’re in a hole, stop digging.

Whatever you do, don’t take on any new debt. If you’ve found yourself with debt, following these steps can help you to pay down your debts; but they won’t work if you keep adding debt. Nothing could do more to keep you from reaching your goal.

Debt can be a real burden both mentally and emotionally. Owing money makes it hard to do the things we like and enjoy life. Over the long term, the stress of debt can have a significant negative impact on your health as well as relationships with family and friends. By making the decision to pay down your debt, you’ve already taken the first step toward achieving your goal. Be sure to follow the steps above to keep yourself on the right track. Be diligent, stay dedicated, and you too can become debt-free.

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